Funding Models for Public Two & Four-Year Institutions (Finance)

Last Updated 03/08/2024

Funding models refer to the ways in which higher education institutions acquire revenue to operate. As described by Ithaka S+R, there are significant differences between funding models for public two- and four-year institutions in the United States. The three largest revenue sources for four-year institutions are tuition and fees (20%); government appropriations (18%), and sales and services from hospitals (15%). Community colleges receive nearly half of their revenue from government appropriations, the majority from state governments. Non-operating grants and contracts, including revenue from Pell grants, represent 18% of total revenues, and tuition and fees comprise an additional 16% of revenue. Funding models from state governments for public higher education institutions typically include Incremental Funding, Formula Funding, Performance-based Funding (PBF), and State Financial Aid Programs.


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